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Day: September 20, 2009

Commercial property investment and development is a simple cyclical business. Success or failure depends upon timing entry and exit points in the cycle to gain maximum advantage from differences between interest rates and property capitalisation rates.

Rocket science it is not.

Very highly paid directors of commercial property PLCs should get the timing right. If they can’t do this, they shouldn’t be there, should they Lex? British Land share price reach £24 in the final quarter of 2007. A very good time to launch a rights issue, instead they waited as the share price sank steadily before launching a rights issue at 225p in February 2009 . In 2007 the commercial property market was at a high, the perfect time to dispose of investments, instead British Land waited until now to sell Broadgate.

British Land has now ‘off-loaded’ (Lex’s words, is he hinting at British Land’s alleged astuteness?) half of its Broadgate property to Blackstone. That is British Land has chosen to sell a substantial commercial property investment at the bottom of the market. Worse, the purchasers are doing what British Land should be doing at this stage of the cycle, taking a highly leveraged bet (Blackstone are only putting in £75 million of equity) on a cyclical recovery in commercial investment values, which has already commenced.

If ever shareholders needed an angry and unequivocal comment on the judgement of the directors of a major quoted property PLC it is now.

I looked in vain for some harsh words from Lex on behalf of the poor bloody shareholders, instead Lex presents the deal as nice for both parties. For British Land it is ‘insurance cost against further market falls’ and for Blackstone ‘hopes it has called the bottom of the market’

Bun rating, 90%. With flour suitable for toothless mouths, and 10% meat which may or may not be there depending on whether you are buying or selling.